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Avoid the 4 Biggest Retirement Mistakes Americans Make

IN THE PRESS:

Jan. 22, 2020

Retirement is often seen as the reward for a lifetime of working and saving. While retirement is sweet, it can be more financially complex than the “asset accumulation” phase in which you spend most of your life. 

For example, mapping a withdrawal strategy can seem daunting, but doing so could save you tens of thousands of dollars in taxes based on an analysis by Kindur.

Strategic planning is a good time to bring in an expert. Additionally, research suggests that people who work with a financial advisor  grow their assets between 1.5% to 4% more each year than going it alone.1

SmartAsset’s free tool makes finding the right financial advisor for you easy and safe. After submitting a short questionnaire, you receive up to 3 local fiduciary financial advisor matches that you can compare and interview at your convenience and without obligation. 

Each is vetted and legally bound to act in your best interest. Additionally each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

Avoiding these common retirement mistakes and choosing an advisor can help you find peace of mind for years to come.

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1. Missing Out on Social Security Benefits

According to a study by the Center for Retirement Research at Boston College, 62% of men and 65% of women claim Social Security before their full retirement age. In fact, 35% of men and 40% of women claim Social Security when they are first eligible, at age 62. But, waiting to claim at one's full retirement age (67 for people born after 1960), will entitle you to your full benefits amount. 

Further, if you wait to claim Social Security benefits until age 70, your monthly benefits will be at least 76% higher than claiming at age 62.2

One other thing to keep in mind is that some states collect taxes on retirement benefits while others don’t.

qualified financial advisor can help you assess your options for delaying when you claim Social Security as well as minimize taxes on your benefits.

2. Planning on Working into Retirement

While 55% of pre-retirees plan on working in retirement, in reality, only about 28% have paying employment.3 When you retire isn’t always optional. The solution is to save wherever you can in case of an unplanned early retirement and maximizing those savings for passive income in retirement. 

3. Underestimating How Much You’ll Need

The stark reality is that healthcare for a 65-year old couple is estimated to cost $295,000, not including long-term care.4 And, according to the Federal Reserve's 2019 Survey of Consumer Finances, the median retirement savings of people aged 55-64 was $134,000. For people aged 65-74, the number increased to $164,000.

It's possible to plan better for healthcare costs if you don't have $295,000 now. If you want to 
take action, a financial advisor can help you build a cash flow for the times when you might need more care. 

4. Walking the Road Alone

Retirement planning alone can be costly as evidenced by the pitfalls above. However, an expert with investment management experience and knowledge of tax strategies can improve your bottom line while making your life easier. But just how much could it add up to? You may be surprised to hear that households who use a financial advisor could end up with 15% more to spend in retirement.5

Our no-cost tool helps make it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.

SmartAsset is a personal finance technology company that features a financial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe of Financial Advisors.

Sources:
1. Putting a Value on Your Value: Quantifying Vanguard Advisor's Alpha. Vanguard, 2019.
2. How Best to Annualize Defined Contribution Assets? Center for Retirement Research at Boston College, 2019.
3. 2019 Retirement Confidence Survey Summary Report, Employee Benefit Research Institute and Greenwald & Associates.
4. How to plan for rising health care costs. Fidelity Investments, 2020.
5. Harlow, Brown, and Jenks. “The Use and Value of Financial Advice for Retirement Planning.” December 2019..

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